INTRODUCTION KINERJA Jurnal Bisnis dan Ekonomi.

106 KINERJA Volume 17, No.2, Th. 2013 Hal. 104-118 Figure 1 presents the distribution of food expenditures per capita population in 2010. Expenditures on prepared food and drink mostly contributed to total food expenditures by 38. Large expenditure share for prepared food and drink related to those resident who rent house especially students whom their consumption patterns tend to buy fast foods. Cereals with subgroups such as rice, cassava, maize 14 also significantly contributed to total food expenditures. Expenditures on dairy product such as eggs, milk and their product and vegetables were 7. However, spending on high-value foods from meat and its product, fish, oils and fats were relatively low by less than 3. More interestingly share of tobacco products expenditure to total expenditure were relatively high 7. 3. MODEL SPECIFICATION AND DATA 3.1. Model SpeciÀ cation This study estimates demand foods in Yogyakarta. The demand for foods encompass cereals, fish, meat, eggs and milk, vegetables, fruits, oil and fats, prepared food and drink, other foods, and tobacco products. To estimate demand for ten food groups in Yogyakarta, we begin with the classical utility maximization framework. Economists use the concept of utility to define the level of satisfaction that comes from a specific allocation of income among different products. The basis of demand analysis is the problem of how to maximize utility subject to a given level of income. This can be expressed as: 1 where U is a utility function of the quantities of goods consumed, Y is total income, p and q are prices and quantities, respectively. The solution to the equation 1 gives the amount demanded of each good as a function of its price, price of other goods and the consumer’s income. The problem exists for the empirical analyst when the number of good involved is too large. Some alternative approaches were proposes to solve. One is the composite commodity theorem that groups commodities based on the behavior of their relative prices. The others are separability and two-stage budgeting that makes assumption about the consumer’s preferences. This study uses separability and two-stage budget procedures to analyze the demand for ten foods in Yogyakarta. Following Deaton and Muellbaur 1980, Weak separability is important for the second stage of two budgeting in demand system’s analysis. If food is assumed to be weakly separable from non-food, then the consumer’s utility maximization decision can be decomposes into two stages budget procedures. In the first-stage budgeting, total expenditure is allocated among food and non food items. Food expenditure is then allocated among the studied foods. Figure 1 shows the utility tree of a representative Yogyakarta households in analyzing demand for foods. 107 Food Demand in Yogyakarta: Susenas 2011 Agus Widarjono Figure 2. Household Utility Tree for foods Consumption in Yogyakarta The Working 1943-Leser 1963 food demand is chosen in the first-stage budgeting to estimate demand ealsticity for food and written as: 2 where i and j are goods, w i is the share of total expenditure allocated to the i th good, p j is the price of the j th good, is the household expenditures on goods, M k is the demographic variables consisting of urban, household size, years of schooling of household head, age of household head, gender of household head, and two quarter dummy variables Quarter 2 and quarter 3. From equation 2, we can derive uncompensated Marshallian price and expenditure elasticities. Uncompensated price ∈ ij and expenditure ∈ i elasticities are: 3 4 where is the Kronecker Delta that is zero if ≠ and unity otherwise. Own-price, cross-price and expenditure elasticity are evaluated at sample means. Because the Working-Lesser does not provide a direct estimate of income elasticity, this study uses Engle function as follow: 5